With the easing election result related concerns, it is speculated that U.S. consumers are on track to spend their money wholeheartedly during the upcoming Black Friday sales. Major retailers are also preparing to earn a major share of the consumer’s expenditure. More than half of the Americans are expected to shop during the biggest holiday weekend of the year, according to the National Retail Federation (NRF).
Moreover, majority of the retailers derive around 30% and 40% of their annual and final quarter revenues, respectively, from Black Friday sales. This indicates the importance of this day for retailers. Thus, investing in fundamentally strong retail companies may lead some gains to percolate into your portfolio.
Strong Black Friday Sales Forecast
As per NRF, 59% of the Americans or 137.4 million people are planning to hit the stores during the Thanksgiving weekend and retail sales are expected to rise 3.6% during this year’s holiday season. If the turnout is as expected, then it will be higher than last year’s 58.7% or 135.8 million people. Though NRF said that the consumers will spend throughout the holiday weekend, it mentioned that a major part of the spending will take place on Black Friday. According to its survey, around 74% of the shoppers will choose Black Friday compared with a respective 21%, 47% and 24% on Thanksgiving Day, Small Business Saturday and Sunday.
Separately, Black Friday is also expected to attract the biggest share of millennials among all the four days. The NRF forecasts that 86% and 78% of the weekend shoppers that belong to the age brackets 18-24 year and 25-34 year, respectively, are expected to spend on Black Friday. President and CEO of NRF, Matthew Shay said: “Black Friday remains one of the busiest shopping days of the year, with Americans planning to take advantage of aggressive in-store and digital promotions over the entire holiday weekend.”
Meanwhile, another survey from NRF shows that U.S. consumers are already into the holiday spending mood with over half of the shoppers already starting to buy gifts. According to the survey, 55.7% have already opening their wallet to take the advantage of earlier sales promotions of most of the retailers. This was the second best number in the history of the survey. While 61 of these shoppers have spent their money on buying clothes and accessories, 56% have opted for gift cards.
5 Retail Picks
Given this encouraging Black Friday and overall holiday sales forecast, retailers seem to be on investors’ radar in the upcoming days. Hence, the addition of potential stocks from the domain to one’s portfolio may prove to be a profitable option in the current scenario. However, picking winning stocks may prove to be difficult.
This is where our VGM score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.
We have narrowed down our search to the following stocks based on a good Zacks Rank and a VGM score of ‘A’.
Best Buy Co., Inc. BBY: This technology products retailer is already attracting enough consumer attention through its early promotions of Black Friday sales. This Zacks Rank #1 (Strong Buy) company announced that it will open its stores on Thanksgiving Day at 5 pm and will remain open till 1 am on Friday. It will reopen it stores at 8 am on Black Friday. Also, the retailer has already started to attract consumers by offering a wide range of deals on its website, bestbuy.com.
The company has an expected earnings growth rate of 16.7% for the current year compared with the industry average of only 0.2%. Its earnings estimate for the current year has jumped 7.1% over the last 30 days.
The Children's Place, Inc. PLCE: This children's specialty apparel retailer is also not far behind in attracting consumer interest. Through its website childrensplace.com, this Zacks Rank #1 retailer has already started to offer different deals for Black Friday that are likely to help U.S. consumers to purchase a wide range of goods and accessories.
The company has an expected earnings growth rate of 40.5% for the current year. Its earnings estimate for the current year has jumped 8.2% over the last 30 days.
DSW Inc. DSW: This branded footwear and accessories retailer has also started to promote different deals and coupons for Black Friday. While this Zacks Rank #1 retailer announced the start of Black Friday sales from Thanksgiving Day in its stores, it aims to offer the same on its e-commerce site, dsw.com from 12 am on Thursday.
The company’s forward price-to-earnings (P/E) ratio for the current financial year (F1) is 16.42, lower than the industry average of 17.16. Its earnings estimate for the current quarter has increased 1.8% over the last 30 days.You can see the complete list of today’s Zacks #1 Rank stocks here.
Target Corp. TGT: This general merchandise retailer is expected to be one of the biggest gainers from the encouraging Black Friday sales. This Zacks Rank #2 (Buy) company announced the opening of its stores for Black Friday sales from 6 pm on Thanksgiving Day. It is back with the promotion of its popular “10 Days of Deals”.
The company has an expected earnings growth rate of 11.3% for the current year compared with the industry average of 9.5%. The P/E ratio for the current financial year is 14.62, lower than the industry average of 22.21. Its earnings estimate for the current year has improved 5.2% over the last 30 days.
Nordstrom Inc. JWN: With growing demand for clothing and accessories this holiday season, this fashion specialty retailer is expected to benefit significantly from Black Friday sales. This Zacks Rank #2 company announced that Black Friday sales will commence from Thanksgiving Day in its stores and from Nov 25 on its website, nordstrom.com.
The company has an expected sales growth rate of 2.1% for the current year compared with the industry average of 1.9%. Its earnings estimate for the current year has improved 8.8% over the last 30 days.
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